“profit leadership” ‘in times of zero revenue’ aipma · source: kpmg report; 1 apr 2020...

“Profit Leadership”

‘In Times of ZERO Revenue’

for

AIPMA

Mr. NC Narayanan

Ganesh Iyer

AGENDA

❑ Industrial Scenario due to Pandemic

❑ Potential Opportunities opening for ‘Make in India’

❑ SWOT analysis of Indian Plastic processing industries

❑ Paradigm shift needed for survival & growth

❑ What is ‘Profit Leadership’

❑ Short term & Long-term strategies

INDUSTRY SCENARIOS

MAZE OF PANDEMIC

INDUSTRIES

HOSPITALITY

FINANCE

POLITICS

FAMILY

HEALTHCAREGLOBAL TRADE

WORLD ECONOMIC OUTLOOK

COVID19 IMPACT

2.9%

3.4%

-3.0%

4.2%

7.0%

1.9%

2.3%

3.5%

-0.5%

-5.0%

-3.0%

-1.0%

1.0%

3.0%

5.0%

7.0%

9.0%

2019 2020 Forecast

(as on Oct-19)

2020 Forecast

(as on Apr-20)

Economic Growth Projections (% Change in GDP)

World India Sri Lanka

Source: IMF WEO – Oct 2019 and Apr 2020

Optimistic figures

GROWTH DISRUPTION FACTORS

DEMAND

SHOCKS

SUPPLY

SHOCKS

COVID19 IMPACT ON INDIA SO FAR

53%Indian Businesses

report marked

impact of covid 19

on business

operations

80%Indian Businesses

report decrease in

cash flow

60%Indian Businesses

report disruptions in

supply chain

Barclays estimates the economic loss during the lockdown period

to be at US $234.4 Billion (8.1% of GDP)

Source: https://www.livemint.com/; FICCI’s Industry Survey to Assess Impact of Coronavirus

SERVICE SECTORS

First industry to bear the direct brunt of the pandemic. World-

wide, the crisis to cost USD 22 Bn. Indian tourism and hospitality

staring at potential job loss for ~70% of work force

AVIATION AND TOURISM (2.4% AND 9.2% OF GDP RESP)

Source: KPMG Report; 1 Apr 2020 potential impact of Covid 19 on the Indian economy

Despite the effort by RBI to mitigate the impact on the

financial institutions, liquidity and potential risk of defaults to

remain main concerns

FINANCIAL SERVICES – BANKING AND NBFC

From the perspective of services, the impact is low with primary

concern with being increased pressure on network due to

increased use of broadband.

TELECOM

NATURAL RESOURCES SECTOR

Source: KPMG Report; 1 Apr 2020 potential impact of Covid 19 on the Indian economy

With reduction in movements, the transport fuels have seen

reduction inn demand. The natural gases also face supply

chain disruptions as >50% is imported

OIL AND GAS

With no fluctuation in the demand and supply of electricity,

power sector has been least impacted. However, collection

delays and cash flow crunch do pose some challenges

POWER

With construction, automotive and infrastructure sectors seeing

drop in production levels, the demand for steel, aluminium and

copper to take a hit. Coal demand to have minimal impact

METALS AND MINING

FOUNDATION OF ECONOMY

Since it falls under government declared essential category,

the impact is likely to be low on both primary agricultural

production and use of agri-inputs like seeds, fertilizers, etc.

FOOD AND AGRICULTURE

Source: KPMG Report; 1 Apr 2020 potential impact of Covid 19 on the Indian economy

About 25% of total MSMEs in India face the risk of closure due

to the current lockdown situation.

MSMEs (~30% of GDP)

RECOVERY BENCHMARK

3 M people died 25% of nations wealth lost

8:15 am on August 6, 1945

JAPAN’S TURNAROUND

126 M people GDP 4.84 Tr.$ 38,210 Per Capita

GDP 8.70 Tr.$ 55,904 Per Capita322 M peopleUSA

JAPAN

By 1980 Japan became the 2nd largest economy in the world

SUGGESTED ATTITUDE

We cannot direct the wind but;

We can adjust our sails!

TRANSFORMATION APPROACH

Year of

Recovery

Year of

Consolidation

Year of

Excellence

RAY OF HOPE FOR FUTURE

OUTLOOK MAKES THE DIFFERENCE

“Every problem and adversity is a seed of

Equivalent benefits”

-- Napoleon Hill

GOVERNMENT RELIEF PACKAGES

THE NEW NORMAL

US CHINA TRADE WAR

LEADING ECONOMIES

BRIC GDP forecast

2006 2010 2015 2020 2030 2040 2050

US US US China China China

China China China US US US

Japan Japan Japan India India India

Germany Germany Germany Japan Brazil Brazil

UK UK UK Russia Russia Mexico

France France India Germany Japan Russia

Italy Italy France Brazil Mexico Indonesia

Canada Russia Russia UK Germany Japan

Russia India Italy France UK UK

Brazil Brazil Brazil Mexico France Germany

OUR STRENGTHS

PROCESSING

CAPACITY

POLYMER CAPACITY

ENGIG.

PLASTIC

CAPABILITY

CHEAPER LABOUR

GOVT

POLICY

EXPORT EXPERIENCE

EQUIPMENT

MFG TECHNICAL

COMPETENCY

OUR WEAKNESSES

Poor Quality Image

Lack of Cost Control

No latest tech/automation

Poor Labour management

Lack of Integrity

Poor reliability of supplies

No best practices adopted

Poor accountability & management practices

Saving mentality than investment

EFFECT OF CHALLENGES

GLOBAL PANDEMIC

Reactive Leadership

companies Closed

Proactive Leadership

companies survived

TIME TO CHANGE

PARADIGM SHIFT NEEDED

WHAT IS THE PARADIGM SHIFT?

NEED OF THE HOUR - AAA

AMBITION

ALIGNMENT

AGGRESSIVENESS

PARADIGM SHIFT – REVISIT BUDGET

CUSTOMER SENSITIVITY

DO’s & Needs Interaction Zone becomes the Business Model

DO’s

Business Process Capability

NEEDS

• Instant delivery

• Zero defects

• Value for money

Economy

ProtectedGlobal

PASS ON THE COST TO CUSTOMER

CUSTOMER DECIDES THE PRICE

CHANGING RULE OF THE GAME01

PARADIGM SHIFT – PROFIT DRIVERS

COST OPTIMIZATION

TRANSFORMATION AGENDA

PRODUCT

PROCESS

MARKET

PEOPLE

TECHNOLOGY

PRODUCT TECHNOLOGY

Design Optimization through Value Engineering

& Mould design optimization

PRODUCT TECHNOLOGY

Industry 4.0

Smart manufacturing

SYSTEMS & PROCESSES

Customer Management

Design Management (Product & Process)

Material Management

Production Management

Outbound Logistics

After sales service

QUALITY MANAGEMEN

T

FINANCE MANAGEMENT

PEOPLE MANAGEMENT

INFRASTRUCTURE MANAGEMENT

INFORMATION / KNOWLEDGE MANAGEMENT

Value Stream

LEAN MANUFACTURING

Plossl’s Law

LABOUR OPTIMIZATION

WASTE ELIMINATION

PARADIGM SHIFT – REVIST VALUE STREAM

BUSINESS PROCESS MANAGEMENT01

REENGINEERED PROCESS

CONTINUOUS IMPROVEMENT CULTURE

Continuous Improvement Culture with

Total Employee Involvement

WHAT IS PROFIT LEADERSHIP?

WHAT IS ‘PROFIT LEADERSHIP’

“’PROFIT LEADERSHIP’ is a holistic approach to enhance profits by focusing on the

‘value’ delivered to the customer through the optimum ‘VALUE STREAM’,

engaging everyone in the organization”

Highest Profit in the Industry1

Lowest Cost Producer2

Perpetuity through value added services3

Image – Well respected in the industry4

WHAT IS PROFIT LEADERSHIP?

Profit

Leadership

‘Profit’

‘Leadership’

SINGLE POINT AGENDA

PROFIT ENTITLEMENT & ACTUAL

Entitlement

ProfitActual Profits

“Area of

Concern”

Actual Profit is far less (20-30%) than Entitlement profit

PROFIT LEADERSHIP

ROI Capital Investment + Working Capital

Net Profit

Net

ProfitSales Revenue - Cost=

=

PARADIGM SHIFT – PROFIT DRIVERS

TRADITIONAL COST REDUCTION

Inventory

ReductionChangeover time

Reduction

Down time

Reduction

Rejects & re-work ReductionRight sizing Spare parts

Reduction

01

TRANSFORMATION APPROACH

Dr. Edward Deming

Speed of Response

TEI

Total Employee

Involvement

Zero

Defects

GENERIC PROFITABILITY DRIVERS

Profitability

1

FTR

New products

2

Optimum

Working Capital

3

Velocity of Information Flow

4

Velocity of material flow

(manufacturing)

5

Efficient Distribution

Network

ENABLING IT SYSTEMS

HOW TO IMPROVE PROFITS?

Searching for profit leaks and analyzing the root causes & solutions

Consider the risk factors that apply to the processing in each area

Quantify the financial loses based on the evidence & data

Integrating the measures with other Improvement projects.

PROFIT LEAKAGE

Su

pp

ort

Ac

tiv

itie

s

Firm Infrastructure

Human Resource Management

Technology Management

Procurement

Bidding &

contractingDesign &

Estimation

Execution Survey &

billing

Primary Activities

PROFIT LEAKAGES

VALUE STREAM

Sourcing

&

Purchasing

3 P ALIGNMENT

PROFIT

PROCESSPEOPLE

ALIGNMENT

ACCOUNTABILITYDEFINED & MEASURED

REPEATABLE EXCELLENCE

LEAN MANUFACTURING SYSTEM

Old Process Manufacturing system New Lean Manufacturing system

LEADER ROCKS THE BOAT

“Willingness to change is a strength, even if it

means plunging part of the company

into total confusion for a while.”

- Jack Welch

GURU’S FINAL WORD

“You don’t need to DO THIS as survival is not compulsory”

- Dr. Edward Deming

If You Do Not Change Your

Direction, You May End Up

Where You Are Heading.

LAO TZU